1. DeCA West Ms. Michelle Frost Chief, Semi-Perishables Ms. Michelle Frost Chief, Semi-Perishables Sales Update

2. End of Cheap Food?  Healthcare costs  Oil price surge  Weak dollar  Weather Drought in Australia Flooding in Argentina  Demand China beef consumption has doubled  Impact of ethanol  Healthcare costs  Oil price surge  Weak dollar  Weather Drought in Australia Flooding in Argentina  Demand China beef consumption has doubled  Impact of ethanol

3. Water It takes 450 lbs of corn to produce enough ethanol to fill an SUV gas tank It takes 800 gallons of water per person per day to produce daily food intake Corn 1,500 gls water = 1lb beef 7 lbs corn = 1lb beef 2.5 lbs corn = 1lb poultry Sustainability?

4. Consumer Impact  FMI Trend Reports 71% increase in home cooking frequency 67% buying fewer luxury items 60% buying more store brands  Value will be focus  Fewer trips to secondary stores  Fewer trips = STOCK UP  FMI Trend Reports 71% increase in home cooking frequency 67% buying fewer luxury items 60% buying more store brands  Value will be focus  Fewer trips to secondary stores  Fewer trips = STOCK UP

5. Retail Shift  New outlets Supercenters, 70% Dollar stores, 64%  Losing ground Drug channel, -3% Grocery, -6%.  Same store dollar sales declined as well  New outlets Supercenters, 70% Dollar stores, 64%  Losing ground Drug channel, -3% Grocery, -6%.  Same store dollar sales declined as well

6. Defining Trends  Four trends will shape the retail operating environment the remainder of this decade:  Aging population  Increasing ethnic diversity  Need for speed  Health & wellness concerns  Opportunities products, alterations to the store (lighting, store set) accommodate older shoppers’ limitations  Four trends will shape the retail operating environment the remainder of this decade:  Aging population  Increasing ethnic diversity  Need for speed  Health & wellness concerns  Opportunities products, alterations to the store (lighting, store set) accommodate older shoppers’ limitations

7. The Three Ps  Manufacturers trying to keep pace with new items Portability Preparation simplicity Preparation time  New product concepts must respond to speed- of-life issues without sacrificing flavor  Manufacturers trying to keep pace with new items Portability Preparation simplicity Preparation time  New product concepts must respond to speed- of-life issues without sacrificing flavor

8. Fastest-Growing Categories 1.Drinkable yogurt 2.Fresh fish/shellfish & seafood 3.Alcoholic cider 4.Ready-to-eat salads 5.Baby formula 6.Dairy-based drinks  Source: executive news report from nielsen global services, december 2006 1.Drinkable yogurt 2.Fresh fish/shellfish & seafood 3.Alcoholic cider 4.Ready-to-eat salads 5.Baby formula 6.Dairy-based drinks  Source: executive news report from nielsen global services, december 2006 >$1 Billion

9. New Team Members  Brad McMinn – Chief, Perishable  Barbara Merriweather – Category Manager, Local/DSD  Bridegt Bennett – HQ Produce Specialist  Brad McMinn – Chief, Perishable  Barbara Merriweather – Category Manager, Local/DSD  Bridegt Bennett – HQ Produce Specialist

10. Promotions  Total items published reduced 21% Dollar Sales Per SKU + 5% Units Per SKU + 7%  Increase Pallets/Shippers  Incorporate Club Packs Averaging $6.8 million per month $2 million per month increase  Seasonal Programs + $9 million  Total items published reduced 21% Dollar Sales Per SKU + 5% Units Per SKU + 7%  Increase Pallets/Shippers  Incorporate Club Packs Averaging $6.8 million per month $2 million per month increase  Seasonal Programs + $9 million

11. Front End Racks  Fixtures have been selected  Currently Developing stock assortment Surveying stores select type of fixtures  60 days to manufacture equipment  Phased implementation - September  Fixtures have been selected  Currently Developing stock assortment Surveying stores select type of fixtures  60 days to manufacture equipment  Phased implementation - September

15. Check It Out  Shoppers choosing self-checkout: Wal-Mart (45%) Kroger (43%) Target (40%) Publix (28%) Costco (26%) Whole Foods (14%) Safeway (13%) Meijer (11%) Albertson’s (11%).  Shoppers choosing self-checkout: Wal-Mart (45%) Kroger (43%) Target (40%) Publix (28%) Costco (26%) Whole Foods (14%) Safeway (13%) Meijer (11%) Albertson’s (11%).

16. Space Allocation – Bragg North  Today little variance in plan-o-grams Based on historic sales data Sets based on class of store No factor for lost sales or promoted volume  Reduce space in declining categories Fewer items = IN STOCK  Reconfigure flow to maximize allocation efficiencies  Today little variance in plan-o-grams Based on historic sales data Sets based on class of store No factor for lost sales or promoted volume  Reduce space in declining categories Fewer items = IN STOCK  Reconfigure flow to maximize allocation efficiencies

17. Organic Options  Organic food sales represent just 2.5%  Organics grew 30% in 2007  Grown roughly 20% per year for past five years  Grocery annual sales grew 3–5% overall  Organic food sales predicted to double as early as 2009  Organic offerings in personal care, nutritional supplements, household cleaners, and pet food  Organic food sales represent just 2.5%  Organics grew 30% in 2007  Grown roughly 20% per year for past five years  Grocery annual sales grew 3–5% overall  Organic food sales predicted to double as early as 2009  Organic offerings in personal care, nutritional supplements, household cleaners, and pet food

18.  Sales of Bar Coded Organic Products # Items up 17% in last 12 months (June-May) – from 540 to 635 Sales for June-May period up 35% over prior year to 34.4 m  Environmental Initiatives Reusable grocery bags sold starting 10/30/2007 1,252,864 sold thru 06/23/2008  Compact fluorescent light (CFL) bulbs, FY 08 Goal: 1 Million 878,105 sold FYTD – thru 06/23/2008  Sales of Bar Coded Organic Products # Items up 17% in last 12 months (June-May) – from 540 to 635 Sales for June-May period up 35% over prior year to 34.4 m  Environmental Initiatives Reusable grocery bags sold starting 10/30/2007 1,252,864 sold thru 06/23/2008  Compact fluorescent light (CFL) bulbs, FY 08 Goal: 1 Million 878,105 sold FYTD – thru 06/23/2008 Focused on “Green” Efforts

19. Expand Benefit - Access G/R  Developing staff office for support  Serve as single POC for store support Logistics Communication Transportation Equipment  Develop “Virtual Solution” Internet ordering – on site payment Develop total solution to include payment Expand – self fulfillment  Developing staff office for support  Serve as single POC for store support Logistics Communication Transportation Equipment  Develop “Virtual Solution” Internet ordering – on site payment Develop total solution to include payment Expand – self fulfillment

20. Retail Perspective  Consumers are plugged into technology  Logging on to plan trips search for restaurants and socialize  Top 15 web domains eBay.com, 1st Amazon.com, 5th Target.com, 12th Wal-Mart.com, 15th  Consumers are plugged into technology  Logging on to plan trips search for restaurants and socialize  Top 15 web domains eBay.com, 1st Amazon.com, 5th Target.com, 12th Wal-Mart.com, 15th

21. Ms. Michelle Frost Chief, Semi-Perishables Ms. Michelle Frost Chief, Semi-Perishables Thank You!